MCLE & Homesteads

Yesterday I traveled to Burlington to attend an MCLE seminar, Preserving and Transferring Your Client’s Principal Residence, primarily to hear the discussion about Declarations of Homestead. The distinguished panel of experts consisted of Alexander Bove, David Correira, Robert Ryan, Leslie Sleeper Madge and Robert Gorfinkle. Much of the program involved Medicaid planning and it was fascinating but also a little frightening given its complexity. Unfortunately, but not unexpectedly, the “should you file a new homestead after refinancing” question was left unanswered. In the 2003 Bankruptcy Court decision, In re Heretakis, 293 BR 82, that court held that Massachusetts law would not consider a mortgage to be a deed that would terminate an existing homestead. Unfortunately, no state appellate court has held likewise (although no such court has held the contrary, either). In the meantime, the panel seemed to suggest that practitioners continue to give explanatory but non-specific answers when confronted with this question, and hope that one of several pending homestead-related bills that clarify this situation be enacted soon. There did seem to be agreement that advising a client to record a new homestead after refinancing “to be safe” was problematic since the new homestead would wipe out the earlier homestead regardless of the legal effect of the mortgage. If the homeowner recorded a homestead in 2001, incurred a debt in 2002, refinanced in 2003 and recorded a new homestead in 2004, the 2004 homestead would terminate the one filed in 2001 and the debt from 2002 would then come before the homestead and be outside of its protection. (I had always understood this to be the case but once when I explained it on the Blog I was chastised by a lawyer who maintained that there would be no “interruption of coverage” in this scenario). One last thing: the panel emphasized that anyone filing for bankruptcy absolutely should file a declaration of homestead before filing the bankruptcy petition, no matter when the debts came into existence.